A 5-Step Guide for Getting a Business Loan With a Bad Credit

A common saying goes, “opportunity hits you when you least expect it”. And maybe you have dreamt of expanding your business, or perhaps you have a brilliant start-up idea. So to boost your business, you will need to get a loan. And your average credit score needs to be at least 711 for this. But if you have bad credit, the doors to opportunity might start to close on you. That being said, is there a way to get a business loan for bad credit?

Fortunately for you, if you know the how-tos, you can apply for a business loan even with bad credit. 

Why Is Credit Score Vital for Receiving a Business Loan?

If you recently started your business less than a year ago, chances are you do not have a credit score yet. The reason is that credit reporting agencies do not have adequate information on how your business is handling a loan. However, they will still refer to your credit score to see if you can take a loan.

Typically, credit unions and bank lenders will expect to see a personal credit score that is 650 or more. However, some might even set the credit score limits above 680. As such, a credit score is vital for taking business loans because it helps the lenders determine if you are qualified to manage the loan once you have taken it. Additionally, it also helps them to understand the best loan size for you.

How to Qualify for a Business Loan With Poor Credit Scores

Step #1: Analyse Your Existing Credit Score

The first step to getting yourself approved for a business loan for bad credit is to get a copy of your personal and business credit scores. Once you have these in hand, start reviewing them and check them for potential errors and mistakes. And if you find any, reach out to credit bureau agencies to get them resolved. 

Step #2: Look at All Your Options

There are numerous business loans that you can apply for with bad credit. Therefore, make sure to look into all your options to find the one that will get you the money you need while also having easy repayment options.

Step #3: Have a Good Plan for Your Business

If you plan on getting a loan for your business, you will also need to start working on a good business plan to help pay off the loan in time. Moreover, your lender might even ask you for one during your loan application process. Besides, having a strategic business plan will help you steer clear of money management problems.

Step #4: Prove Your Trustworthiness

One way to boost your loan application with bad credit is by providing the needed collateral. This way, even if you cannot cover the loan amount, the lender will automatically take the collateral as your final payment.

Meanwhile, make sure you do not offer your personal assets like your home as collateral. This is because if your business does not take off, you might end up losing both your home and business.

Step #5: Have a Co-Signer

Last but not least, if you want a business loan for bad credit, try and find an individual with excellent credits who can co-sign on your loan. This way, your lender will know that the co-signer will be able to cover your loan payments if you cannot repay the loan. However, make sure the loan amount is affordable for both you and the co-signer. 

Undoubtedly, getting approved for a business loan with bad credit scores might seem like an impossible feat. But luckily, there are still various opportunities waiting for you, including providing collaterals, down payments, and so on, with which you can still get the green light to start your own business!